Fresh Business Thinking on the Hot M&A Market

The online resource for business owners and entrepreneurs, Fresh Business Thinking, asks Jeremy Furniss, Partner at Livingstone, why the M&A market is so active at the moment:

It has been a very hot summer for M&A so far. The temperature is unlikely to cool soon.

The worldwide spate of mega-deals may take the headlines but the heat in the mid-market is just as intense. Not since before the 2008/9 financial crisis have there been as many transactions as in the past quarter. Across all our main geographic markets, it’s been hectic: 12 transactions in eight weeks in deals from specialist consultancies to shower tray manufacturers, media brand owners and healthcare providers.

To understand this bout of activity in the mid-market, just remember the mood among business owners in the second half of last year.

At that time there was mounting confidence in the UK economic recovery. Sellers were able to see that they could get better value for their businesses. Purchasers were more confident in the quality and sustainability of the earnings of their target companies. The debt markets had materially improved. So, last autumn, more business owners started to talk serious turkey. And these results have now flowed through.

Although the UK referendum on membership of the EU remains a cloud on the horizon, the domestic political and fiscal outlook looks settled. Business owners have the confidence to plan ahead. Tax measures such as entrepreneurs’ relief remain in place. The debt market continues to improve. The UK remains open to foreign direct investment and its stock of entrepreneurial, growing and often very international businesses will be attractive to overseas acquirers.

The markets also appear to have taken in their stride the serious risks to the global economy – such as the Federal Reserve raising US interest rates, China’s stock market turbulence, and the interminable Grexit crisis.

So the deal activity that we have witnessed in the past few weeks has been the first wave. We expect to see a larger, more dramatic wave before the end of 2015.